MUMBAI: Buyout firm Blackstone-controlled Gokaldas Exports is on a collision course with the capital market regulator over its decision to classify original promoter Hindujas as minority holders that helps it overcome minimum public holding norms.

The Bangalore-based garments exporter got a shareholders' approval re-classifying the promoter Hinduja family as non-promoters after the Securities & Exchange Board of India had turned down the proposal earlier.

In a filing to the BSE, the company stated: "Consequent to the approval of the requisite majority shareholders to alter the article of association, the original promoters of the company...do not have any rights to control... The board has decided to reclassify the original promoters from promoter category to non-promoter/public category."

"The promoter holding has declined to 68.27% after the change of Article of Association and we are now fully compliant of Sebi minimum public holding norms," said Naveen Chandra, company secretary. "We never approached Sebi in this matter." Companies are evolving novel methods to overcome the regulatory requirement of a minimum 25% public holding by June to remain listed.

While a majority is selling shares in the open market to minority holders a few are placing shares with institutional investors. Garment exporter Gokaldas' promoter holding, as of December 2012, was 88.27% of which 68.27% was held by private equity fund Blackstone FP Capital Partners while the original Indian promoters Hindujas' stake was 20%. Blackstone did not respond to an e-mail seeking comment. Sebi official could not be contacted for comments.

The issue of re-classifying some of the promoters into minority holders legally remains unsettled with the regulator reportedly taking a view that it cannot be done. But an appellate body has ordered Sebi to give reasons in a case involving Procter & Gamble's Indian unit called Gillette.

"The company can reclassify the promoters by altering the Article of Association, however, complying in this manner with Sebi norms will fall in the grey zone," said Sandeep Parekh, founder, Finsec Law Advisor.

"Sebi can grant exemptions on the merit of the case.'' Sebi rejected the proposal of Gillette India from reclassifying its Indian promoters as public shareholders following which it appealed to Securities and Appellate Tribunal (SAT). SAT directed the market regulator to give reasons for rejecting Gillette India's proposal for meeting its minimum public share holding norms.

"We have approached Sebi with a proposal, in keeping with our commitment to complying with the new law and engaging with Sebi to achieve compliance with the minimum 25% public shareholding requirement norm. Currently, the Hon'ble Tribunal has upheld Gillette's appeal, directing Sebi to pass a reasoned order on the same." said spokesperson of Procter & Gamble, the promoter of Gillette. Â

Under the shareholding norms, promoters of listed private companies have to ensure a minimum public shareholding of 25% by June this year. Sebi has given avenues such as OFS, follow-on offer, institutional placement programme (IPP), bonus or rights issues to non-promoters to increase free float among public. If promoters choose an alternate route to cut their shareholding, they have to seek Sebi's approval.

Most of the companies have opting for OFS avenue while a few preferred IPP route to reduce promoters stake. "The company can claim that they have fulfilled norms, however, Sebi has the powers to accept or reject the method the company takes," said JN Gupta managing director at Stakeholders Empowerment Services.

Two years ago, London-listed Cookson had gifted 11.48% of its Foseco India stake to Karibu Holdings UK, bringing its stake down to 75% to comply with the Indian listing norms.